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How Tech Startup Accelerators Work

The Tech Startup Accelerator Process
Co-founder of Reddit and partner at Y Combinator, Alexis Ohanian, speaks onstage during TechCrunch Disrupt NY 2015.
Co-founder of Reddit and partner at Y Combinator, Alexis Ohanian, speaks onstage during TechCrunch Disrupt NY 2015.
Noam Galai/Getty Images for TechCrunch

The tech startup accelerator process almost sounds like the premise of a reality TV show — "Big Brother" meets "Shark Tank." Tons of talented young entrepreneurs apply for very few spots with the biggest and best-known accelerators. The lucky teams move out to a new city and new environment, work grueling hours side by side in a shared space, and dream about their "Demo Day" debut in front of deep-pocketed investors.

To better understand each step in the tech startup accelerator process, let's use the example of Y Combinator, a model for Silicon Valley accelerators. The first step in the accelerator process is the application. At Y Combinator, candidates fill out an online application that collects information about each of the founders of the company and asks for an overview of the big idea. There is no application fee (though some other accelerators do charge one). Y Combinator notes that the people behind the company are often more important than the idea itself, which tends to change significantly during the accelerator process.

After reading the application, Y Combinator invites the top prospects to Silicon Valley for in-person interviews. Yes and no decisions are made the very next day. For accepted teams, Y Combinator offers a standard deal of $120,000 for a 7 percent share of the company (nonprofits are exempt) [source: Altman]. If the team hasn't legally founded a company yet, Y Combinator can help with that, too.

Teams are flown out to the San Francisco Bay Area, where they spend the next three months developing their ideas and business plans. Y Combinator, unlike many startup accelerators, doesn't provide office space. Teams work where they live, but come in to Y Combinator headquarters for "office hours," one-on-one consultations with partners and experts. There are also group events like weekly Tuesday "dinners" — really a half-day conference — featuring candid conversations with influential speakers (yes, they got Zuckerberg).

The climax of the startup accelerator process is Demo Day, when startups in various stages of development get to pitch their business idea to a room of 450 invitation-only investors [source: Y Combinator]. In the weeks and months following Demo Day, Y Combinator continues to consult with startups, offering advice on choosing the best investment offers.

The relationship between startup and accelerator doesn't end with a funding offer. One of the huge benefits of partnering with an accelerator is access to a powerful network of alumni and business partners. A stamp of approval from Y Combinator, for example, gives young companies access to executives and entrepreneurs across Silicon Valley.